Timothy A. Koonce: The first-mover advantage of values based marketing

VALUES BASED MARKETING

By Mark Schaefer

The idea of values based marketing is certainly picking up steam. The most explosive example was the Nike-Kaepernick project of course, but today I’d like to show how this seemingly risky strategy might result in long-term competitive advantage, especially if you’re the first in your market to do it.

The Eagle has landed

One company that has been working on this values based marketing approach for several years is U.S. retailer American Eagle. The company spends an extraordinary amount of money on consumer research and has even hired teens for their executive office to keep the company from doing anything that might alienate its core audience (college-aged Americans).

Here are some of the values based marketing initiatives AE has launched over the past couple of years:

After a shocking shooting at a Florida high school, the company sent an email blast to its customers encouraging them to participate in anti-gun rallies. It posted a photo of a large rally to its 2.7 million Instagram followers.
AE stopped using photo-shopped images of models with unachievable body types. It launched a platform called AE X Me which taps real customers, based on their Instagram posts, to become brand ambassadors. The photos in the campaign are created in schools and gritty neighborhoods of its real customers.
The brand launched a special project called “It Gets Better” to place a spotlight on civil liberties and empowering LGBTQ youth. It developed a special fashion line called “The Pride Collection” to fund the civil liberties efforts. The company is using transsexual and same-sex couples in its ads proclaiming, “love is love.”

Predictably, these politically-oriented moves were controversial. On Instagram, it was clear the brand had alienated quite a few people. “Stay out of politics, and do what you’re good at … selling clothes,” wrote a user underneath the brand’s anti-gun post. In fact, there have been live protests against the brand in some cities.

Why would a brand invite this kind controversy?

The pull for values

Because that’s what their customers want.

The company’s decision to support the progressive causes of its target audience (ages 15 to 25) did not come casually. American Eagle researchers found that young adults think of themselves as diverse, politically involved, and interested in engaging with people outside of the digital realm (yes, they like shopping in stores). That diversity extends to ethnicity, sexuality, and even body image.

By aligning closely with the values of their core college-aged constituent, they are trying to cement themselves into the hearts of their customers.

Friedman would have a fit

In business school, most of us grew up on lessons from the Nobel-prize-winning economist Milton Friedman and his admonition that a firm should only engage in activities that increase shareholder value. We learned that business was one thing, and society was another. Here is one of his most famous quotes:

“There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”

Obviously, the world is changing. Businesses are beginning to question how they contribute value to their employees, communities, and nations beyond profits and a stock price. Business leaders are re-thinking their responsibility to the world and the reasons their companies exist.

We are witnessing an important shift in business history, and it’s just beginning.

The numbers support values based marketing

There is a lot of research emerging to validate this new business approach, but in summary, taking a stand that aligns with customer values may be one of the last strategies we have to gain loyalty in a shop-around society,

Edelman showed that 67 percent of consumers will try a brand for the first time solely because they agree with its position on a controversial topic and 65 percent said they will not buy a brand when it stays silent on an issue they consider important.

When brands speak out they are rewarded. Nearly a quarter of all consumers will pay at least a 25 percent premium when their values align with a brand and 51 percent will buy the brand exclusively based on shared values.

The numbers are convincing. Taking a stand – with due diligence – is one of the few remaining paths to loyalty, advocacy, and even premium pricing.

American Eagle is a good case to examine because it has been working its value based marketing strategy for several years. In an industry experiencing cataclysmic disruption from Amazon, its stock price is on a roll. Of course we can’t assume this marketing strategy is the only cause of their impressive run, but the company is doing something right:

values based marketing

The end of loyalty

While taking a polarizing stand may help sell shoes and jeans to teens, it’s not for everybody. Not many management teams I know of are ready for a media backlash and watching their products being burned in the streets.

However.

The days of loyalty are over.

Research from McKinsey and others shows that across a broad range of industries, only 13 percent of consumers are loyal to a brand, on average. In some categories like shoes, cosmetics, and financial services, it’s even lower than that, and in a precious few industries like automotive and insurance it’s somewhat higher. But on average, a full 87 percent of consumers shop around, a dramatic change from even 10 years ago.

The cold, hard fact is, taking a stand that aligns with consumer values may be the only way to earn loyalty today.

Values based marketing and competitive advantage

This begs an important question. Nike was the first in its category to make this move and wants to “own” the values of its core audience. The research would indicate this was a smart move. Now, what is their competitor Adidas supposed to do?

The values based marketing strategy is a long-term play, and it remains to be seen whether it works for Nike. But at least for now, the market has responded with positive support. The company lost $4 billion in market value the day after the ad campaign was announced, but the stock price recovered — and more — within a few days.

values based marketing

There is evidence that Adidas also flirted with a Kaerpernick arrangement. Now, is it locked out? Would a values based marketing campaign by Adidas seem un-original, or even desperate?

There are only so many “values” to go around. American Eagle’s research led them to a highly-focused strategy supporting gun control and civil liberties. I don’t think a competing retailer in their category could now mimic their aggressive and consistent strategy. They are owning the hearts of core customers by aligning with their values, and also by being the first to do it.

The issue of congruency

A values based marketing strategy will only work if the values aligned — not just with the consumers, but also with the company itself.

According to Bloomberg, the Kaepernick ad has already generated $43 million in media exposure for Nike. OK. So far, so good.

But if Nike wants to permanently tap into a youth market demanding social change, they must be congruent with their actions. They must follow through on their own message of sacrifice. They must share their immense wealth with those they’ve exploited in deplorable factories. It means investing money into their workers and providing safe, well-paying jobs with benefits. It means compensating designers for their work. It means divesting from any links to police or brutal labor practices at home or abroad.

Human rights, racism, civil liberties — these are extremely complex issues that aren’t going to be solved through a sensational ad campaign.

The difference between American Eagle and Nike — at least so far — is that AE has placed its money, its influence, and its workforce in service of the values they also display in their marketing.

Values based marketing is not for everyone. But if you have the business case to do it, and more important, the congruent company culture to do it, it might be the last opportunity you have to create loyalty, new demand, and even higher pricing for your products.

Keynote speaker Mark Schaefer Mark Schaefer is the chief blogger for this site, executive director of Schaefer Marketing Solutions, and the author of several best-selling digital marketing books. He is an acclaimed keynote speaker, college educator, and business consultant. The Marketing Companion podcast is among the top business podcasts in the world. Contact Mark to have him speak to your company event or conference soon.